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  • From: Ron Thigpen <rthigpen AT nc.rr.com>
  • To: "Internetworkers: http://www.ibiblio.org/internetworkers/" <internetworkers AT lists.ibiblio.org>
  • Subject: Re: [internetworkers] speaking of gas prices.
  • Date: Thu, 28 Aug 2003 17:54:21 -0400

Steven Champeon wrote:

Oh, yeah. Sorry, I forgot. Somehow I'd gotten the idea that restricting
the number of new power sources, while deregulating in order to drive
prices down, and not doing anything to regulate the amount of power used
might have had something to do with it.

deregulation isn't to drive prices down. it's to let prices float to represent actual market supply and demand. rising prices are just as important as they signal the market to generate investment and greater supply.

the CA case had two markets working, retail and wholesale. it was the wholesale market that was largely deregulated and failed. undersupply was a precipitating factor, and led to blackouts, but it was market manipulation by the producers, wholesalers and intermediaries that sent the situation into a tailspin.

the retail supply system (the grid) failed to deal gracefully, but the retail pricing system did drive equilibrium by encouraging conservation. it's just that the pricing signals the retail market was responding to were largely a sham.

the key takeaways for me on CA are: price signals and conservation can work, but you've got to design an open market to allow them to operate. their mistake was throwing out the old rule book without having written a new one. and the new rules had better rely on the fact that energy companies are going to do everything in their power to turn a profit.

the way CA played out, deregulation now has pariah status. which is kind of a shame because, with proper design and implementation, it probably could work. in the meantime we can play around with market lubricants like realtime pricing.

--rt






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